If we have an item that is zero tolerance and was not re-disclosed to the borrower within the three days, but the Seller is stating they will pay for it since they're the reason the fee was assessed, would we still have to cover the fee since we failed to re-disclose in time? It's for a rate lock extension and was not disclosed on time, but the agent let us know they're working on an addendum to the contract that states the Seller will cover the fee at closing.

I'd run with what you are getting and not worry...it's not costing the borrower.

If the fee is not assessed to the borrower then how would it be out of tolerance? You will show the fee in the paid by other column on the CD.

If the seller is paying it, put it in the paid by seller column.

I think the OP may be saying that it was originally going to be a borrower paid item, which was not properly disclosed by the lender, but now the seller is coming along and saying he/she will pay for it. I think we have discussed scenarios like this before, but don't remember the consensus, if any. These scenarios are interesting. Should the seller be made to foot the bill when the creditor made the mistake of not disclosing it? If it was not known at the time the information came in that the Seller would be responsible for it, then a Rate Lock Extension Fee charged to the borrower should have been disclosed on a Revised LE. If this was not done, there would generally be a tolerance cure. I don't really feel that the Seller should be "punished" for the creditor making that mistake.

The bank cannot compel the seller to pay any fees - if they want to voluntarily pay it - so be it..

Yes, but the seller is paying because they think the borrower is going to owe the money. If they knew the borrower would end up not having to pay because the bank has a tolerance cure situation, then I doubt they would still offer to do so.

The facts are the facts. Regardless of who actually pays the fee, if it's not the borrower, it should not show in the borrower-paid column on page 2, and there won't be a tolerance violation for that cost. If the seller is generous enough to pay the fee, it goes in the paid by seller column. If the bank realizes it failed to disclose the fee on the LE (or, as in this case, failed to timely issue a revised LE with the fee), it can pay the fee and list it in the Paid by Others column, and there won't be a tolerance violation.

A responsible lender would pay the fee, and not allow the seller to do so.

This is the gist of it